Mortgage Insurers See Applications Fall in June

A combination of tighter underwriting guidelines and weakening borrower demand helped push the number of applications for mortgage insurance received by members of the Mortgage Insurance Companies of America, an industry trade group, to their lowest level on record in June. Insurers received just 90,896 applications during the month, less than half of year-ago totals, and roughly 17 percent below the number of applications received in May, according to a press statement. Insurers have been forced to tighten their eligibility guidelines as 2008 has move forward, with home prices continuing to fall and a steady stream of insured borrower defaults that have put many insurers directly into the bull’s eye for ratings downgrades; one insurer so far, Triad Guaranty Inc. [{TGIC]], has seen its MI subsidiary head into runoff after Fannie Mae (FNM) and Freddie Mac (FRE) yanked their authorization for the insurer to underwrite new business for the GSEs this past June. MI providers issued just 74,256 policies in June, well below the 164,928 issued one year earlier; likewise, new primary insurance written fell to $13.7 billion, 55 percent below the $30.6 billion in new business written in June last year. “The return to realistic and responsible lending standards is being reflected in the housing market,” said Suzanne Hutchison, executive vice president at MICA. “The mortgage insurance industry remains very active in providing home loans to help borrowers who are seeking secure and predictable financing during these uncertain times.” Credit trends appear more mixed Some good news might come in the form of slightly falling insured defaults during June, the second straight month of a drop in defaults recorded by the trade group. MICA said that its members recorded 67,908 primary insurance defaults during the month, down slightly from the 67,967 recorded in May. June’s default total, however, still remained 28.4 percent above June 2007’s 52,888 recorded defaults. Along with static defaults, the number of cures increased, helping push the cure ratio up to 63.6 percent from 59.9 percent last month. June’s cure rate remained well off 2008’s high of 87 percent, however, which was recorded in March. In other words: borrower defaults remain high, although the trend of massive monthly and annual increases appears to have abated somewhat. Whether that’s temporary or the start of a longer-term trend is an educated guess that even the most respected of economists will disagree over; our own guess is that any plateau — or even tapering off — in default activity is likely and unfortunately to be short-lived, as we begin to feel the effects of a recession, inflation, and a second wave of trauma in option ARMs and jumbo mortgages starting towards the fourth quarter of this year. For more information, visit http://www.privatemi.com.